A reduction in interest expense, all else constant, will cause a(n):
A) Decrease in the times interest earned ratio.
B) Increase in the cash coverage ratio.
C) Decrease in the long-term debt ratio.
D) Decrease in the return on equity.
E) Increase in the price earnings ratio.

Question

Quizplus · Accepted Answer

A reduction in interest expense improves a company's ability to cover its interest obligations, thus increasing the cash coverage ratio, which measures a company's ability to pay interest on its debt with its operating cash flow.

A Reduction in Interest Expense, All Else Constant, Will Cause